Trump administration finalizes major regulation to stop union dues skimming from Medicaid

The Trump administration’s Center for Medicaid Services (CMS) today issued a final rule to stop states from skimming union dues and political contributions from payments to home caregivers serving Medicaid-eligible clients.

The move is the latest development in a multi-year effort by the Freedom Foundation —begun after the U.S. Supreme Court’s 2014 decision in Harris v. Quinn struck down mandatory dues requirements for home caregivers as unconstitutional — to stop unions from taking advantage of home caregivers.

“Repealing this illegal regulation is a major victory for caregivers and those who care about protecting Medicaid from being looted by special interests,” said Maxford Nelsen, the Freedom Foundation’s director of labor policy.

“Kudos to the Trump Administration for ending this shameful Obama-era policy,” said Ashley Varner, Vice President of Communication and Federal Affairs. “This move by the Trump administration will put as much as $150 million per year back in the pockets of families who need it most.”

Federal Medicaid law requires payment for services be made directly to service providers. Nevertheless, beginning in the 1990s, certain states began diverting Medicaid funds to third-parties like SEIU and AFSCME from home caregivers’ wages.

In 2014, the Obama administration attempted to retroactively legitimize the practice by adopting a regulation inappropriately adding an exception to the statutory direct payment requirement.

A report released by the Freedom Foundation last year found that eight states — including California, Connecticut, Illinois, Massachusetts, Minnesota, Oregon, Vermont and Washington —deducted nearly $150 million in union dues from the wages of more than 350,000 caregivers in 2017. An estimated $1.4 billion in Medicaid funds was diverted to unions since 2000. Caregivers in Pennsylvania are now also affected.

The Freedom Foundation began calling on the federal government to curtail the practice in the spring of 2017 and, in July 2018, CMS issued a notice of proposed rulemaking announcing its intent to repeal the Obama regulation, 42 CFR § 447.10(g)(4).

In its final rule, CMS noted the regulation was “neither explicitly nor implicitly authorized by the statute” and that removing it “forecloses the ability of a practitioner to assign a portion of his or her Medicaid payment to a union.”

“States have no business, legally or morally, diverting Medicaid funds to unions,” said Nelsen.

“Caregivers deserve to be able to choose how to spend their wages after they’ve been paid in full for their services. If they wish to support a union, that’s up to them. But giving unions access to caregivers’ paychecks has enabled them to exploit caregivers using an array of unethical and illegal schemes, up to and including forging signatures on membership forms.”

Brad Boardman, a Washington state caregiver who has served multiple clients over the past decade, lauded today’s announcement by CMS:

“I was one of the first caregivers in Washington to opt-out of SEIU after the Supreme Court’s 2014 decision in Harris v. Quinn. Unfortunately, many caregivers weren’t so lucky. In recent years SEIU and state governments have concocted a host of schemes to keep skimming dues from caregivers’ wages for the union to use on its political agenda. They’ve lied to and pressured caregivers. They’ve forged signatures on membership forms. They’ve even spent our money on lawsuits and deceptive ballot measures to keep caregivers in the dark about their rights. Today’s action by the Center for Medicaid Services is a big step towards giving caregivers control of their own money again.”

Longtime Washington state caregiver Loren Freeman who, along with his wife, serves as a caregiver for his daughter, had this to say:

“As both a caregiver and former regulatory analyst for the state, it’s clear the dues collection schemes unions like SEIU implemented have always violated federal Medicaid law. The Obama administration tried to grant legal cover to this scheme by passing a regulation in 2014, but an administrative rule can’t abrogate federal law just because a powerful special interest wants it to. By repealing this illegal regulation, the Center for Medicaid Services is not only upholding the rule of law but helping caregivers. Many live-in providers like myself pay as much as $1,300 a year in union dues for dubious representation. All caregivers deserve to be able to decide for themselves whether to hand over part of their wages to a union.”

Miranda Thorpe, a Washington state caregiver for her daughter, stated:

“SEIU has proven it will do whatever is necessary to keep profiting off of Medicaid and taking money from caregivers. After the Supreme Court recognized caregivers couldn’t be forced to support unions, SEIU and corrupt Washington state politicians arranged to keep seizing dues from caregivers like me who had never signed up for union membership or agreed to pay dues. Dues payments should be voluntary and Medicaid money should be reserved exclusively for the care of our most vulnerable citizens, not the unions or their political causes.  I’m thrilled that federal officials are acting to protect caregivers from being taken advantage of by greedy unions like SEIU. It is long overdue.”

The final rule takes effect in 60 days.

The Freedom Foundation is a West Coast-based think and action tank promoting individual liberty, free enterprise and limited, accountable government.